You’ve got bills. Do you really need to pay for life insurance every month on top of that? Sure, life insurance may seem like a great deal for your loved ones – when you pass away, they’ll get a lump sum to help with your final expenses and the cost of living. But is life insurance right for you? Before you decide, let’s break it all down in a simple, no-nonsense way.
What Is Life Insurance?
Life insurance is a contract between you and an insurance company. You pay a monthly or annual premium, and in return, when you pass away, your loved ones receive a payout, known as a death benefit. This money can ease any financial burdens that your passing may incur.
Who Needs Life Insurance?
In some situations, life insurance can be the difference between financial independence and a financial burden. Here are some instances when you should seriously consider life insurance:
- You Have Dependents
One of the major values of life insurance is it can replace your income after you die. If you have kids, a spouse, or even aging parents who rely on your financial support, life insurance ensures they’ll be taken care of even if you’re not around. Your passing will already be a hard time for people who love you; life insurance can help them avoid financial stress in their time of grief.
- You Are a Stay-At-Home Parent
Even if you don’t bring in a salary, your work has real value. If something were to happen to you, your partner or family might need to pay for childcare, get household help, or fund other services. Life insurance can help cover these costs.
- You Have Debts
Picture this: you have a mortgage; you live with your family in your forever home. Now (we know it’s hard) imagine that you suddenly pass away. Life is unpredictable and you may not want to think about it, but you should be prepared! If you have life insurance, it can assist with or even pay off the mortgage, allowing your family to continue living there. However, without sufficient life insurance money, the bank may repossess your house. A life insurance payout can cover your debts, so loved ones don’t suffer.
- You Want to Cover Your Funeral Expenses
Funerals can be pricey, and many funeral homes insist on payment in full before the service. Your loved ones may not have the cash to cover your expenses, and your life insurance policy can relieve that burden
- You’re Young
Hold on, aren’t young people the last ones who need life insurance? Actually, no. The younger and healthier you are, the more affordable your life insurance premium will be. You may not have a mortgage or dependents right now, but if you see marriage, homeownership, or children in your future, you can purchase a life insurance policy as an investment in your future self.
- You Want to Secure a Line of Credit
Life insurance doesn’t just benefit your loved ones when you die; it can benefit you right now. Depending on the type of life insurance, you can use the cash value of your policy as collateral for a loan.
- You Own a Business
If you’re a business owner, life insurance can help ensure your company continues running smoothly in your absence. It can cover business debts, provide for key employees, or help facilitate a smooth transition of ownership.
Who May Not Need Life Insurance?
Let’s consider cases where life insurance might not be necessary:
- You’re Covered Through Work
Some jobs offer life insurance as part of their benefits package. Just make sure it’s enough coverage; you may want to consider your immediate, ongoing, and future financial obligations to work this out. You should also investigate what happens to your life insurance policy if you were to leave your job. If you’re not satisfied with your level of coverage, consider getting individual coverage as well.
- You Have Enough Savings and Assets
If you have enough money set aside to cover funeral costs, debts, and support your family long after you’re gone, life insurance may not be essential.
Is Life Insurance Worth It?
It depends. Every person is unique and we’re not here to tell you that you must have life insurance. However, life insurance can be indispensable if you want to provide for your dependents, pay to replace some of the services you provide for your family at home, repay your debts, cover final expenses, secure a line of credit, or futureproof your business. If you’re a young person who wants to do one or more of these things someday, it may make the most financial sense to get life insurance now, when it’s most affordable.
We’ll leave you with one final thought: research shows that as many as 8 in 10 people overestimate the cost of term life insurance, and younger generations overestimated by as much as 213%. It couldn’t hurt to explore your options and get a quote.
